Chinatown project begins in downtown San Luis Obispo

The steady growl of demolition work on Palm Street early Monday marked the commencement of the Chinatown development in downtown San Luis Obispo.

Knocking down the former Shanghai Low building on the 800 block of Palm Street to make way for a temporary parking lot is the first step in a multiphased plan for the latest project by Copeland Properties.

The original neon “Chop Suey” sign that had been perched on the roof of the building for years was kept by the developers and will be incorporated into the new project.

The developer plans to build 46,140 square feet of retail space and 32 residential units on Monterey Street and later a 78-room hotel on Palm Street. Construction on Monterey Street will likely begin mid-2013.

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The new parking area, expected to be complete in four weeks, will add 16 parking spaces to be used while the Monterey portion of the project is built. When that happens, 40 parking spaces will be eliminated.

One key change: Vehicles in the parking lot will be rerouted to improve the traffic flow. Motorists will be able to exit the lot from both Palm and Monterey streets but still only be able to enter from Palm Street.

The historic buildings at Chorro and Monterey streets, including the Blackstone, Sauer Bakery and the former Muzio’s building will be preserved and retrofitted. That work is under way.

The Chinatown redevelopment was approved by the city in 2009 after years of heated discussion over its design and height.

The city made a deal with the developers in December that gave Copeland Properties the option to buy 1.3 acres containing a city parking lot with 155 spaces as well as the vacant public works building at 955 Morro St. for $1.1 million.

That agreement allows Copeland Properties to pay the property price in two parts.

The developer will pay 60 percent of the purchase price with the construction of the commercial and residential phase and the remaining 40 percent when the hotel is ready to be built.

The deal was intended to help the developer move the project forward after it stalled during the recession.

“We are delighted to see it moving forward,” said Claire Clarke, San Luis Obispo’s economic development manager. “There will be more vitality on Monterey Street in the nearer term. It has really gotten very vacant down there, and this will change that around.”